Congress Approves First Big Dodd-Frank Rollback
nytimes.com
nytimes.com
These are the same anti-government folks who will whine endlessly about social services as 'handouts' and 'freebies' and look the other way while trillions go to subsidize the rich and powerful. This is ideology.
Either you believe in democracy or you do not. In a democracy the government is you, not an organization out to get you. Regulations exist to protect the whole from the greed of a few.
This mythical anti-government civilization full of freedom only works in a farming based frontier society that has occupied land and can give parts of it away for free to all new comers, where any government can only take away rights. But that time is long gone.
> Regulations exist to protect the whole from the greed of a few.
That's clearly one reason, and certainly the most commonly cited reason, but it's equally clearly not the only one, and it's certainly not the only outcome, whether intended or not.
The best buffer against "the greed of a few" is to allow real competition. Lightening regulations on smaller banks is quite likely to encourage competition.
HN has a sizable portion of commenters with libertarianesque views, who would be in favor of reduced regulation while simultaneously deadset against subsidies and guarantees to banks and megacorps.
Don't know if you missed this bit, but these rollbacks were voted on and approved by Republican (and Democrat) representatives, who in turn were voted for by the people.
>Either you believe in democracy or you do not.
It is possible to believe in democracy and also believe in limited government.
Regulations exist so that entrenched players can use the lethal force of government to block new challengers. Never quite as blunt as I put it, but that is the threat backing all the actual outcomes.
And the overall solution is to allow them to fail next time. Don't fix it, let it crash and burn. Stop socializing the losses since the profits were privatized.
Then pass a regulation barring the US from ever giving another "bailout". In the aftermath of '08 those corporations played the US like a fiddle to get their billions of dollars in free loans because "our whole financial system could collapse if you dont". Why wouldn't they play this game again, perhaps even more brazenly than last time?
That's not how it appears to everyone. That's often how they are crafted, but this is not a problem with the concept.
I also found it quite ironic that the law that supposedly regulates the finance industry bears the names of two most corrupt politicians with close ties with banks (one with Fannie/Freddie and the other with AIG or the banking industry in general).
This does not negate the free market idea, rather we are just looking at a small detail in a larger picture. Without context things can be confusing.
The larger picture is that the banking system is not a free market entity. It was designed to prevent bank runs on insolvent banks - so that banks could practice currency inflation without, effectively, being called on it by other banks. (long story on inflation - most economists of course argue that it does not hurt the populous - some dissent...)
So anyway, the initial extra-market act - setting up the banking system, was designed to aid the banking elite in expropriating the wealth of the populous via systematic currency inflation - of course the stated aim was to "stabilize the banking system" and that is also true - prevent bank runs on insolvent banks so they can inflate more$$.
That stability, plus lots of greed, gave smart financial thinkers freedom to come up with yet more ways to exploit the system for their own benefit. Speculation in one kind of asset or another, etc etc.
Hence people decided the system "needed to be regulated" -- this new round of regulation needed to essentially quell the disturbances made possible by the first round - (the laws passed which created the banking system in the first place, here renamed as "the first round of regulation")
So sure - if we are going to have an artificial banking system propped up by law in the first place, it is only natural that it will require ever more regulation to keep it upright. After all, it is no longer "of the ecosystem" but "on top of it" - not subject to the full guidance of market forces.
Free market people who want to roll back recent, stabilizing, regulations, but support the banking system in general may not, in some cases, understand what they are asking for.
The other interesting tidbit I learned form her is that the bare minimal paperwork processing that will still get done is actively being outsourced to India. Just a reminder that one of the large problems to come out of the last financial crisis was that banks couldn't even tell who owned the actual morgages or provide the actual signed loan documents to many borrowers.
If (or rather when) we have the next mortgage crisis it's going to be an absolute mess.
But maybe the next one will be bad enough, or the one after that worse yet. I gather the last time this happened (1870s-1930s) it was a lot of fun.
Maybe the populist "drain the swamp" could be taken as a vague direction on this issue, but in any case he seems to have done the opposite.
[0]: https://www.nytimes.com/2017/01/30/us/politics/trump-dodd-fr...
He provided many examples and cited data showing how the number of small banks has drastically shrunk since the regulation has passed, and directly related to it, causing the US banking market to further consolidate.
Ironically, there are now 5 major banks who control most of the market now largely as a result, while competition from smaller firms has declined drastically. So much for ending "too big to fail". Like most well intentioned democratic policy during the last decade intended to punish the larger banks for their destructive behavior, if anything they've come our stronger. Not to mention the bail outs with completely neutered terms in terms of bonuses and other potential disincentives for bad behavior.
It's one thing to say you want to restrict the power of banks to manipulate markets and generate risk, it's another to actually do it.
The fact this bill only benefitted small firms and kept the major banks under check sounds completely consistent with the Mnuchin's promises during his congressional hearing. He's on of the few Trump cabinet that seems highly competent and well suited for the job. I'm happy he has stuck around.
https://www.c-span.org/video/?421858-1/treasury-secretary-no...
You can't realistically ask a population to vote a party or politician forever. The real solution is to reform the U.S. political system so that people don't have Republicans as their only alternative to Democrats when the Democrats become too corrupt, as well, or people just grow tired of some of their policies.
Remind me who was President when the Glass-Steagall Act was repealed? That’s at the heart of all of this. And the so-called Community Reinvestment Act.
After his policy agenda got derailed (especially healthcare which he hoped would be one of his signature achievements) and his party was wrecked in the midterms, and then he got dragged into years of frenzied investigations into nothing, he ended up signing a lot of the legislation that the GOP-controlled legislature put on his desk over the coming few years, because he thought that would help him out politically. It didn’t really work, but we got a lot of terrible policy out of it.
I don’t think it’s fair to blame “Democrats” in general for a GOP-driven policy agenda though, just because Clinton didn’t veto every bill that came across his desk.
Also, in comparison to the administrations either before or after him (or if we compare their Supreme Court picks, ugh) Clinton looks positively dreamy.
False equivalencies do not make both parties the same.
https://en.m.wikipedia.org/wiki/Commodity_Futures_Modernizat...
Historically in the US, parties undergo radical change: FDR's party is very different from Wilson and even more so than Andrew Johnson; Harding's is very different than Lincoln's. We are in what is called the 6th party system if I'm not mistaken.
So practically speaking it could be that the primaries are more important than the actual elections.
Sometimes a party goes away in name but continues in spirit, at other times an existing name is retained but the core philosophy of the party changes enormously.
For example the ordinary term for members of the Conservative and Unionist Party in England is "Tories" but legally Tories are a different and much older political party. The allegiances and policies shifted, those who opposed Whiggs in parliament hundreds of years ago and those today arguing about how exactly to leave the EU have almost nothing in common beyond being vaguely "centre-right".
This is just passive aggressive nonsense echoing the meme that the Dems represent citizens' interest any better than the GOP.
Large banks can easily deal with the law and keep right on going. All it does is make life much harder for smaller banks.
But it's such a large act that without knowing which parts were repealed it's very hard to discuss.
A virtual paper trail isn't a bad thing when you've got to (a) manage risks based on decisions made by these processes and (b) make sure you're obeying the law.
This is not specific to my bank it goes for every player in the industry.
I'm not critisizing this, just pointing out that the process is hugely more complex than just querying a few tables. Especially given that there's no margin for errors since they get hugely expensive.
Having been involved in such a thing, I can tell you that the people writing the paper trail, and the ones actually creating/using the information on the paper trail have little to do with one another.
Those who create the trail are just trying to meet the rules, and care little about what actually is done. Those using the information care little about the rules, and just want some information. If you are lucky they might email and ask a question or two.
It's 100% useless. It just makes it look like there is information, there's nothing real there.
eg: Rule: You must secure your server. Paper writer: we secure our server. Sysadmin: No one talked to me about this, and even if they did I don't understand what you want from me, go away.
You get what I mean? It's worthless work.
I don't think that's all it does. That's certainly one polarized way to look at it though.
I think the idea is that speculative lending is a race to the bottom that hurts everyone in the long run (banks and consumers), but it's profitable in the short-term. Instead of another boom/bust and repeating 2008, we try to have banks lend responsibly. That does potentially slow economic growth although some would argue it would go to realistic rather than artificial levels.
Wether the restrictions on the banks outweigh the protection for consumers is typically the debate.
However, there is a significant risk of not being able to get a mortgage under reasonable terms in the event of another credit crisis.
There won't be another house price crash until there is another generation of people who forgot the old one. You could be waiting 20 to 30 years.
A truism of the financial world is that if you thought of it, so did everyone else. That means that unless you are truly original (you probably aren't) you can only make money on a particular position if that position is one that makes money if everyone does it.
A position that requires you to do it, and everyone else to do something else (like waiting on a crash to buy a house, while everyone else doesn't) isn't going to work. If you are waiting, so is everyone else, and that means everyone will buy, which means the price won't go down, and you have a self-canceling prophecy.
On a more serious note, I agree with you that it doesn't make sense to wait for a crash. It is better to position yourself such that when a crash happens (whether it be real estate, equities or baseball cards) one is in a reasonable position to take advantage.
Yes, and it will be ugly. It was already getting bad before the tax code overhaul, but now that the payment of interest on student loans is not deductible (by anyone, namely diligent debt-paying low-income grads for whom the tax deduction was originally intended, those making < $80K), it is kind of inevitable.
Most student loans are in the government's hands, most of the interest goes to the Federal Government, not to eg JP Morgan or Bank of America. The US financial system has minimal exposure to student loans and the default problems.
You're talking about $400 billion of present high risk default potential. The housing market crash wiped out ~$25 trillion in paper wealth just in the US, including in the stock market. American wealth dropped by 40%.
That drop would be equal to $40 trillion today. The entire student loan market is $1.4 trillion, a fraction of that is a default problem.
The Fed was running $85 billion per month QE programs just to stabilize the housing market.
If it were necessary, the Fed could fix the student loan mess in six months of casual QE.
The 2008-2010 great recession took down dozens of global banks, including making two of the big four in the US insolvent. Dozens of large corporations from around the globe required short-term Federal Reserve loans to remain operational as the global monetary & banking system froze.
Student loan defaults are a $50 billion per year problem. The loaned out money was conjured out of thin air by the Fed and US Government (which does not have a surplus to lend); the interest being paid is paid on that same magic money. The Fed shovels large piles of cash back to the US Government every year. If they need $300 billion to fix it, they've got more magic money (ie the Fed will debase the dollar and 0.2% of the value of all dollar assets globally and they'll do a program with the US Treasury).
The biggest difference is that owning a home has tax advantages over stocks, so it's even worse to sit on the sidelines if you can get in responsibly.
If you're looking for a big gain in real estate, you'd do better to understand which local markets are heating up--this can be predicted from data with some reliability, unlike global crashes. (Note: sitting on the sidelines until a crash happens is not the same thing as predicting when a crash will happen.)
Whether buying a home is a good decision depends primarily on your own factors--savings, income, tax status, family status, job stability, where you want to live, etc. External factors like global financial trends have little impact.
Here's the list of ~30 banks affected according to wikipedia as of ~Jan 1, 2018:
rank, name, location, marketcap
13 Charles Schwab Corporation San Francisco, California $243B
14 State Street Corporation Boston, Massachusetts $238
15 BB&T Winston-Salem, North Carolina $221
16 SunTrust Banks Atlanta, Georgia $205
17 American Express New York, New York $181
18 Ally Financial Detroit, Michigan $167
19 Barclays New York, New York $157
20 USAA San Antonio, Texas $155
21 MUFG Union Bank New York, New York $154
22 Citizens Financial Group Providence, Rhode Island $151
23 Deutsche Bank New York, New York $148
24 Fifth Third Bank Cincinnati, Ohio $142
25 Royal Bank of Canada New York, New York $141
26 Credit Suisse New York, New York $141
27 UBS New York, New York $140
28 BNP Paribas New York, New York $139
29 Northern Trust Chicago, Illinois $138
30 KeyCorp Cleveland, Ohio $137
31 BMO Harris Bank Chicago, Illinois $131
32 Santander Bank Boston, Massachusetts $128
33 Regions Financial Corporation Birmingham, Alabama $124
34 M&T Bank Buffalo, New York $118
35 Huntington Bancshares Columbus, Ohio $104
36 Discover Financial Riverwoods, Illinois $100
37 Synchrony Financial Stamford, Connecticut $95
38 First Republic Bank San Francisco, California $87
39 BBVA Compass Birmingham, Alabama $87
40 Comerica Dallas, Texas $71
41 Zions Bancorporation Salt Lake City, Utah $66
42 E-Trade New York, New York $63
43 Silicon Valley Bank Santa Clara, California $51
What else is there? (besides partisan histrionics)
Xpost from Reddit: https://www.reddit.com/r/politics/comments/8ldxmj/comment/dz...
Ideally, you would follow it up by putting even stronger regulation on big banks.
should read:
A decade after the global financial cluster f#ck - orchestrated by irresponsibility and negligence on the past of the United States government, and its puppet master, Wall Street - politely refereed to as a recession..."
The NYT's wording attempts to rewrite history, badly. This is journalism?
Dodd-Frank costs banks a lot of many but it doesnt scale with the size of the bank, smaller banks are subject to the same constraints as the biggest banks though they are not capable of causing a systemic crash. They should not be penalized for the actions of the bigger players.
Contagion (https://en.wikipedia.org/wiki/Financial_contagion) can still take place with a (literal) local bankruptcy depending on the exposure of larger institutions to that smaller firm's losses.
Pretty sure this only applies to banks with small holdings, so I'm not really sure why anyone's getting their panties in a knot.
Definitely not small, maybe medium but even then depends how you define it. The relevant regulations are rolled back for banks with less than $250 billion in assets. So the megacorps like BoA and JPMorgan are still regulated but other very large entities aren't - American Express and BB&T were the examples I read earlier.
it is Apple own assets, not deposited by somebody. Apple also is the biggest by valuation and in the first 10 by revenue worldwide. Not a good yardstick to compare with to showcase that somebody isn't a big one. I mean it is like saying that USS Enterprise isn't a big one because Caribean Princess is bigger :)
A useless degree has zero value and can’t be resold to cover the dollars lost to unrepaid student loans.
I mean, an art degree can easily lead to retail management. A business management degree often leads to the same sort of job. In some companies, you can earn these jobs working, but you are more likely to reach that management position at 30 instead of 23. These jobs don't pay all that much, true. But it is better than nothing and hey, if you went to college, you'll likely be a few years ahead of the peers that didn't. Theoretically, this will be a bonus. A teacher might not earn enough to cover their loan, especially if the person has an early childhood education (pre-school) degree as those jobs tend to be just slightly more than minimum wage. Yet few would argue that these are useless degrees. Some degrees become useless over time when a field is phased out, and others produce a few too many degrees when the field changes, rendering a few useless. Lawyers have experienced this - and not only that, but those lawyers that decide to do community work and be a criminal lawyer (especially a public defender) might not be able to afford his or her loans.
This is the problem with writing degrees off as useless due to earnings. Lots of professions will fall into that category, even if I get the feeling they are talking about things like art degrees - which some folks would argue are necessary. The only real way to avoid this is to make sure the student loans are affordable even in the worst situations. Make college not cost as much. Use alternative ways to provide education other than loans. Taxes are a good start for funding since overall, college degrees are good for the college at large.
If it has no positive bearing on your employment prospects then, for the purposes of producing a livelihood, it's useless.
> I mean, an art degree can easily lead to retail management. A business management degree often leads to the same sort of job. In some companies, you can earn these jobs working, but you are more likely to reach that management position at 30 instead of 23. These jobs don't pay all that much, true. But it is better than nothing and hey, if you went to college, you'll likely be a few years ahead of the peers that didn't. Theoretically, this will be a bonus.
Spending tens of thousands of dollars for something that's "better than nothing" is lunacy. Might as well just give the money directly to those people so they can use it as a down payment for a house.
> A teacher might not earn enough to cover their loan, especially if the person has an early childhood education (pre-school) degree as those jobs tend to be just slightly more than minimum wage. Yet few would argue that these are useless degrees.
Most teacher's degrees are useless. I'm not suggesting we eliminate training or education entirely but a preschool or elementary school teacher does not need to spend four years at university to teach children ABCs or 123s.
> Some degrees become useless over time when a field is phased out, and others produce a few too many degrees when the field changes, rendering a few useless. Lawyers have experienced this - and not only that, but those lawyers that decide to do community work and be a criminal lawyer (especially a public defender) might not be able to afford his or her loans.
And it naturally sorts itself out over time. It happens to people without degrees as well. There were plenty of horse carriage drivers that had to find alternative work.
> This is the problem with writing degrees off as useless due to earnings. Lots of professions will fall into that category, even if I get the feeling they are talking about things like art degrees - which some folks would argue are necessary. The only real way to avoid this is to make sure the student loans are affordable even in the worst situations.
I'm not against people pursuing their dreams. I'm against them doing it with my tax dollars. If a future barista wants to spend four years partying at a liberal arts school studying underwater basket weaving then let her find her own sugar daddy to pay for it.
> Make college not cost as much.
Stop handing out boat loads of cash via student loans and college prices will plummet immediately.
> Use alternative ways to provide education other than loans. Taxes are a good start for funding since overall, college degrees are good for the college at large.
Or starve the beast and let it fix itself in the private sector.
Honestly the only government involvement I'd be on board with is on the supply side, primarily through nominally priced community colleges. At least there the outlays are fixed (i.e. fixed local budget), there's no money flowing to shady private sectors, there's no conflict of interest in juicing the price higher as it's coming out of the same pocket. I suggest nominal pricing over free as there needs to be some skin in the game for students as well though I'd want it to be low enough that a min wage job should cover it.
This approach also has the pleasant side effect of forcing private institutions to compete against nearly-free community colleges. Without Federal loans juicing their prices, they'd be forced to come down as well.